tv Nightly Business Report PBS November 2, 2010 6:30pm-7:00pm PDT
>> tom: it's election day. investors and companies alike are waiting to hear which party will control the house of representatives. >> the question becomes do we have a deadlock and gridlock, which will not be viewed positively in terms of deficit reduction, or do people start to work together? >> susie: what today's outcome at the polls could mean for your portfolio, and a look at the rising cost of getting those votes. you're watching "nightly business report" for tuesday, november 2. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
captioning sponsored by wpbt >> tom: good evening, everybody, and thanks for joining us. as americans cast their votes in polling booths across the country, investors on wall street voted with their wallets, buying up stocks. susie, the major market indexes closed at six-month highs today. >> susie: tom, there's a lot of historical data suggesting the period after mid-term elections is positive for stocks, especially when it leads to political gridlock. >> tom: but there is some concern this year's election results might not lead to a windfall for investors. as we continue our coverage "midterm 2010: it's the economy," suzanne pratt gets wall street's take on today's election. >> reporter: in washington, it may be all about elephants and donkeys, but on wall street, there's only one beast that counts. and when it comes to mid-term elections, history shows bulls love gridlock.
a scenario in which republicans gain control of at least one house of congress is widely expected. anticipation of that result is also partly responsible for the 11% rally in the dow since the end of august. strategist scott wren is looking for a sell-off if democrats take the house but not the senate. >> that's what the market expected, that's what the market has been pricing in. i think we've got a lot of technical resistance up here at these april highs, so i think the market is poised, after the big run that we've had here, for some sort of modest pullback. >> reporter: investors supposedly like a divided government because it results in compromise and greater stability. it's also less likely that one party's agenda dominates. but investment pro jim awad is concerned a split in power will mean little progress on a key issue. >> the public wants deficit reduction, the financial markets want deficit reduction. so, the question becomes, do we have a deadlock and gridlock,
which will not be viewed positively in terms of deficit reduction, or do people start to work together? >> reporter: there is, of course, the chance that republicans, considered pro- business on wall street, sweep congress. experts say that unlikely scenario would yield big returns for stock investors. >> the best election outcome for investors is that the republicans take control of both the house and the senate. in the short-term. then, it's going to be up to the republicans to execute. >> reporter: also, unlikely is democrats retaining control of congress, extending one party dominance in washington for another two years. that would be a huge disappointment on wall street. >> i think the first couple of days, it would probably sell-off pretty hard. but i think, at some point, we're not looking for a drastic sell-off, but some sort of modest sell-off, under that scenario. >> reporter: some market pros say, whatever the election outcome, it's effect on stocks will quickly fade. they believe, by early next
year, investors will again be focused on the economy and not politics. suzanne pratt, "nightly business report," new york. >> susie: and now to the business of politics. yes, we've heard a lot about "messages" and "strategy", but campaigns are also multi-billion dollar endeavors, and growing more expensive all the time. why does it cost so much to get elected, and where does the money go? darren gersh takes a closer look at the marketing of politics. >> reporter: research shows you need to see a campaign ad not once, not twice, not three times, but seven to ten times before a candidate's message really sinks in. evan tracey tracks campaign spending on advertising, and says that's a key reason elections are so expensive. >> generally, this is a business about getting repetition. you want people to see your ads as many times as they can, so that the themes start to stick with them. >> reporter: here's how the math looks to a candidate for congress. it costs about $41,800 to buy
enough air time to reach every voter in a congressional district one time with one ad. but voters need to see an ad up to ten times, so it takes $418,000 to get one message out voters will remember. economics professor thomas stratmann researches political advertising. he says a candidate who spends as little as $100,000 more than the other guy will increase his or her vote share by just over half a percentage point. >> tight races can make a difference, because tight races mean elections are won by half a percentage point, and then, campaign spending and campaign advertising are critical. >> reporter: many races are decided in the closing days of a campaign by a very small group of undecided voters. but reaching them costs campaigns hundreds of millions of dollars in the last week. >> there is no other business in the world that spends the money in this fashion, where they are
really talking the loudest to the least amount of people left... are left to hear them. >> reporter: of course, the advertising means little if your people don't show up here, and making sure that happens is another major campaign cost. >> any election that's a toss-up tends to go to the campaign that can generate a few thousand extra votes on election day. >> reporter: political science professor donald green wrote the book on "get out the vote" efforts. he figures a campaign canvasser must knock on 14 doors to find one vote-- cost: $29 each. a phone bank calls three dozen of people to get one vote-- cost: $38 each. and mailers must reach a couple hundred people to get one vote-- cost: $67 each. these costs are for candidates who hire professional help. volunteers are cheaper. but in general, a candidate who wants to turn out a couple thousand extra voters to ensure a victory will have to spend $160,000 or more than opponents to get out the vote.
>> i don't think you can buy the election as simple as... you know, as simple as buying a piece of real estate. what seems to matter is having a message and having a field team that can deploy the message in a coherent and persuasive way. >> reporter: candidates have spent enough money this election to buy every registered voter in the country a large pizza with toppings. but the cost to reach the voters who will make the difference between victory and defeat is more like a steak dinner. darren gersh, "nightly business report," washington. >> susie: here are the stories in tonight's "n.b.r. newswheel." election optimism on wall street-- the dow rose 64 points, the nasdaq added 28, and the s&p 500 was up nine. trading volume fell slightly from yesterday's levels on the nyse, but it rose slightly on the nasdaq. federal reserve policymakers began a two-day policy meeting in washington today. the central bank is expected to launch a second round of bond buying to boost the economy as
it wraps its meeting tomorrow. meanwhile, australia and india surprised global markets today by taking action to cool inflation. central banks in both countries hiked interest rates by a quarter of a point. and toyota wants lawsuits over sudden acceleration problems thrown out. the auto maker is asking a federal court to dismiss the suits. it claims many plaintiffs never had a problem with their cars, and only sued because of publicity over toyota's recalls. still ahead: tonight's word on the street is "agriculture." scott eden of thestreet.com tills the market for three top- rated ag stocks. >> tom: the american dream is fading for some as the sour economy keeps the number of people living in homes they own at a ten-year low. the homeownership rate stayed under 67% during the third quarter according to the census bureau. meanwhile, millions of homes remain empty, including foreclosures and vacation homes.
19 million units were without owners or renters in the third quarter, down slightly from the previous three months. >> susie: many of those vacant properties are in former housing hot spots, like miami. while those markets have struggled under foreclosures and weak home prices, they're getting a new look from foreign buyers. as jeff yastine reports, international shoppers are one reason some weak housing markets are beginning to stabilize. >> jeff: how things have changed in south florida's condo market. there are still foreclosures, but prices have been slashed, and the number of new, unsold condos on the market is falling steadily. buyers like yohan banharrouche are a big reason. >> i'm looking for a brand new building, something very modern. >> jeff: he's from france, and is checking out miami-area condos, including this penthouse with views... >> so this is sunny isles here? >> yes, this is sunny isles. >> jeff: ...unlike anything in paris.
a steadily weakening u.s. dollar and deep price cuts are drawing international buyers like banharrouche. >> it's not so expensive now, because of the market went down in america. and if you want to buy something, you can bring euros, change to dollars, and it can get interesting for us. >> jeff: it is also interesting for realtors like brigitte lina. these days, her clients are all international. many were on the sidelines waiting to buy; now, they're swooping in, looking for investments and making all-cash offers to avoid mortgage delays. >> and they are closing. there are still buyers, because now the buyer says, "you know what? i regret... it would be better to buy now. because i was scared in 2009." so now, they think the market is picking up a little bit. >> jeff: the national association of realtors' chief economist, lawrence yun, says foreign buyers represent a significant slice of u.s. residential sales-- about 5%, or
$40 billion worth, last year. >> the california market generally sees larger numbers of foreign buyers. the arizona/ nevada area also has a large exposure to international buyers. some... the cosmopolitan cities of new york, boston and washington also attract a lot of foreign buyers. >> jeff: from what countries? canada is the largest buyer group recently, followed by mexico, the u.k., china, germany and france. yun credits international buyers with helping stabilize hot spots from the housing bust, like miami. he thinks the trend will continue as long as the u.s. dollar remains weak. as for our condo shopper from france, yohan banharrouche, he's looking for a second home, not an investment. >> if you want to sell something, you have to wait four or five years, if you want to make money. but that's not what i want to do.
i want to buy something that i can live in, not to make money. but if you want to, you can. >> jeff: jeff yastine, "nightly business report," miami. >> susie: tom, it is decision time, finally, for the markets. election day, fed day, and so today was an important day for the markets. tomorrow, even more important. >> tom: absolutely.
and don't forget about earnings. this is the third of three peak weeks. nonetheless, lots of corporate bottom lines. let's get everybody updateed in tonight's "market focus." the election day gains for stocks come as investors await not only today's voting results, but also tomorrow's vote and decision from the federal reserve's open market committee. with the fed expected to announce some type of quantitative easing, buyers were picking up utility stocks, known for paying steady dividends. while the broad market was very close to a two-year high, this utilities exchange traded fund remains below its most recent high hit last month. this trio led the sector-- all of these are electric utilities. constellation energy was up more than 2.5% on better than usual volume. pinnacle west capital was up 2.5%. allegheny energy rallied 2%.
each have dividend yield's above 2.5% energy stocks also did well. if the fed announces a new plan to buy government bonds, it may weaken the dollar, helping boost oil prices. crude prices jumped another 95 cents today, putting oil at the top of its most recent range. several opec oil ministers have been out this week talking about where they think oil should be, from $70 up to $100 a barrel. the winners were independent energy producers. range resources and pioneer natural resources each rallied more than 2%. both have seen higher than expected production. at the bottom of the sector today-- driller rowan, and integrated oil company marathon. rowan's earnings beat the street, but the stock still sold off. marathon's oil production outlook was disappointing. speaking of earnings, b.p.'s latest quarter was hit by costs from its gulf of mexico oil disaster. still, its c.e.o. said the company is "well on track for recovery."
shares were up 1.5%. the stock was over $60 when the gulf oil disaster began. oracle has one of the biggest cash positions among technology giants, over $20 billion. it's using some of that to buy a smaller software firm, art technology group. oracle will pay $6 per share for art technology, almost $1 billion total. oracle gets a leading e-commerce software company with blue-chip customers like continental airlines and best buy. a.r.t.g. shares were very active, closing just below the buyout price of $6 per share. that's a number investors haven't seen since 2001. speaking of revisiting 2001 prices-- oracle investors like the deal, bidding that stock up to its highest close in more than nine years. by the way, oracle c.e.o. larry ellison filed paperwork today to sell one million shares of his stock, worth over $29 million. battery maker energizer blames more devices using rechargeable
batteries for hurting its business. energizer's quarterly results certainly lost some power, down from a year ago and coming in well short of estimates. energizer stock dove almost 10% on a big jump in volume. two other earnings misses-- archer daniels midland came up two pennies shy of estimates; the stock fell more than 6%. and clorox was a nickel lighter than expectations; shares fell 4%. finally, a trio of better-than- expected earnings. pfizer came in three cents over estimates, but was down from a year ago. the stock fell 1%. mastercard blew away forecasts and shares jumped 3%. medco health rallied 11%. and that's tonight's "market focus."
>> tom: one place where real estate values are growing again is out on the farm. thanks to the rally in corn and soybean prices, as well as global demand for food, companies doing business with the world's farmers have growing profits. tonight's word on the street-- "agriculture." scott eden is a reporter at thestreet.com. he joins us from the nasdaq. scott, welcome to "nightly business report." nice to see you. >> hi, tom. >> tom: so as the american farmer is wrapping up a season worth of work, why play ag stocks this time of year? >> as you know, ag stocks are not for the faint of heart. they trade on the commodities prices, and commodities prices really trade on the weather. but they've been flying since july. c.f.industries is up almost 100% since july. i did talk to two traders
today. one of whom is kind of sitting on the sidelines because of the valuation concerns. another one thinks that these stocks might have a it more room to negotiation especially as we kind of enter earnings seasons for the fertilizer names. >> tom: the market takes two sides, and you've got it there. let's look at a trio, including deere and company. close to a two-year high, which certainly speaks to the rally you mentioned earlier. what could be the catalyst, bad weather and higher crop prices? >> you better. there were crop failures in russia, and the usda in october had to slash its yield estimates, especially for corn. that lit a fire underneath commodities prices. >> tom: it certainly has helped out some of those making money in the fields, including agrium, who makes fertilizers. a.g.u.has benefited from low natural gas prices, a key ingredient in making
fertilizer? >> no doubt about it. farmers are flush. they're ready to spend. and agrium, too, it's prize is sort of its retail business. it has a chain of pretty profitable retail sort of farm depose scattered throughout north america. >> tom: trying to take advantage of likely rising incomes with american farmers with higher crop prices. finally, the third one you brought along is dupont, chemical-maker, earnings were out last week. helping to fuel the recent rally. what is interesting here, scott, not just an agriculture play, but really is focused on the global chemical commodity business, isn't it? >> that's right. they've really have a sprawling set of businesses, plastics, and pharmaceuticals, and the pharma ceuticals were a cause of concern. a couple of their drugs came off patents. but they're doing well. they're a competitor with
jonsonto, in the genetically modified seed business. >> todd: w>> tom: we mentioned s is a global business because it is intertwined with a bigger picture. maybe they could be a play on the weaker dollar, couldn't they? >> no doubt about it. and deere plays overseas, in india, china, brazil, all of which farmers are really upgreating to deere equipment. >> tom: any disclosures with this trio, ownership positions? >> oom not allowed. >> tom: you can find a link on thestreet.com. scott eden, with the >> susie: here's what we're watching for tomorrow: quantitative easing-- as we mentioned, the federal reserve is expected to announce new plans to stimulate the economy by purchasing treasury bonds. we'll have reaction and analysis of the central bank's move. and once the midterm votes are tallied, we'll look at what's on
the agenda of the new congress. october was a good month for hyundai. the south korean auto maker sold over 42,000 cars in the u.s. last month, a gain of 38% over the same time last year. u.s. big three auto makers report their numbers tomorrow. total industry sales are expected to hit an annual rate of 12 million vehicles. that's almost two million more than last year. >> tom: mortgage giants fannie mae and freddie mac have cut ties with a florida law firm being investigated by that state's attorney general. freddie has even taken the unusual step of removing loan files from the david j. stern law firm. the practice is accused of faking paperwork to complete foreclosures. published reports say it handled as many as 10,000 foreclosure cases for freddie mac. stern's attorney did not respond to our request for comment. ur
>> with 4% of the globe's population, the u.s. consumes about 25% of the energy. a huge chunk of that comes from oil imports. "if only we stopped importing so much energy," the thinking goes, "we could put a huge dent in the large, troubling trade deficit." of course, increasing exports also reduces the trade deficit. and thanks to twin dynamics-- in american attitudes toward energy use, and in the rapidly growing global demand for electricity-- the u.s. has surprisingly become a significant energy exporter. huge deposits in appalachia and the west make the united states the saudi arabia of coal. but because utilities are slowly phasing out coal-burning plants, coal use in the u.s. is likely to shrink in coming years. overseas, especially in places like china and india, demand for coal is buoyant. in the first half of this year, the u.s. exported $39.7 billion of coal, up an impressive 50% from the first half of 2009.
there's another area for potential growth-- natural gas. just a few years ago, companies were building terminals along the coasts to facilitate the importation of clean-burning liquefied natural gas, or l.n.g. but thanks to huge new discoveries and drilling techniques, the u.s. now has abundant supplies of its own. in september, the department of energy approved the application of one of those import terminals in sabine pass, texas, to convert to an export facility. it turns out the u.s. still produces plenty of what the world needs. i'm daniel gross. >> susie: that's "nightly business report" for tuesday, november 2nd. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by:
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